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2008/8/12-18 [Finance/CC, Finance/Investment] UID:50852 Activity:high
8/11    Our Phony Economy
        http://harpers.org/archive/2008/06/0082042
        \_ This is an outstanding article.  My hope for Obama is that
           he could become the first serious politician on either side
           of the aisle to challenge the assumption that GDP growth shoulds
           of the aisle to challenge the assumption that GDP growth should
           be our primary metric of success.  -tom
           \_ Success is how many countries we can free from TYRANTS
              and AXIS OF EVIL in this world.
           \_ Given the success of a $ measurement of "the economy", perhaps
              the fix is to provide $ values for the things that have been
              left out?  Estimates of the value of "health", "environment"
              and "resources"?
           \_ This article doesn't mention any concepts not taught in Econ 1.
              Every economist knows these things. I'm not sure what's so
              great about the article or how it really addresses what's
              wrong with measuring the growth of the economy via GDP. An
              $800 pair of shoes *does* contribute 40x more to the economy
              than a $20 pair of shoes.
              \_ Proving you don't know what you are talking about.  If I buy
                 an 800 dollar pair of shoes and wear them once or twice
                 less is added to the economy then if 40 people buy 20 dollar
                 shoes and use them to be more productive as people with shoes
                 can contribute more to the economy than people without shoes,
                 they can walk longer distances, are less likely to hurt
                 themselves, etc etc.  Big luxury items don't create as much
                 wealth as a simaler level of basic needs.  That's not to say
                 they don't contribute ANYTHING.
                 \_ You have it BACKWARDS. It's called Demand and
                    Supply (or it should have been). How are you going
                    to make those other people buy the 40 pairs of
                    shoes because you've given up the $800 pair?
                    People make their own decisions about what to buy,
                    which leads to demand, which is fulfilled by
                    supply.  Now if you think 40 x $20 shoes >> $800,
                    then you let us know when you come up with a new
                    mathematical model that is internally consistent,
                    which somehow awards bonus dollars for having been
                    bought by the noble and now magically more
                    productive.  Also, do you think people buy a $20
                    pair of shoes and then say, oh, I can be so much
                    more productive now. No, poor people without shoes
                    with an entrepreneurial bent decide to take a
                    chance and make some money, then realize they can
                    be more productive with shoes, and so buy a
                    pair. The whole theory is backwards.
                    \_ Why are you assuming people are attacking capatalism?
                       Noone is trying to say people shouldn't buy luxuries.
                       People are saying when the economy becomes too geared
                       towards buying and selling luxuries that do not
                       generate work in and of themselves that an economy
                       suffers, even if the GDP is still going up.
                       \_ This doesn't make sense. Nothing generates work in
                          and of themselves. "Real GDP" going up means there
                          is more overall value in the country, regardless of
                          what it was. The market is better at deciding value
                          than you are. A real problem that is mentioned in
                          the article is when "commons" damage is not accounted
                          for.
                          \_ Please provide some proof that the market is
                             "better at deciding value than you are."  That's
                             merely an assertion.  -tom
                             \_ America = free market, the strongest nation
                                in the world. You're an idiot. Go back to
                                Russia.
                                \_ America = democracy, the largst government
                                   in the world, therefore the most central
                                   control of spending.  I see you are totally
                                   incapable of arguing your point.  -tom
                             \_ Well, is it just a coincidence that market-
                                based economies outperform planned economies?
                                Were those planned economies just unfortunately
                                saddled with the wrong planners?
                                But let me put it another way: it's not so
                                important that the market is better at it.
                                It's that *I* am better at deciding what's
                                valuable *to me* than you are. And when we
                                all do that it's called a market.
                                \_ Is Bernake a market planner?  There
                                   are aspects of planning in all
                                   Western countries, and aspects of
                                   market economies in Cuba and China.
                                   Are we outperforming China right
                                   now?  By what metric?  It has already
                                   \_ China mysteriously has been doing
                                      *far* better since they reformed their
                                      system to incorporate market principles
                                      beginning in 1978.
                                      Chinese people are the biggest fans of
                                      the free market in the world.
                                      http://preview.tinyurl.com/bgprg
                                   been proven that groups of individuals
                                   making "rational" decisions for them as
                                   individuals can produce negative results
                                   for the entire system.  And the use of
                                   GDP as a proxy for success has problems
                                   well beyond the problems of the commons
                                   or of incomplete information; the use of
                                   GDP as a proxy for success places a value
                                   judgement on monetary transactions--
                                   monetary transactions are inherently
                                   more valuable than non-monetary
                                   transactions.  Buying food is valued more
                                   highly than growing your own.  Paying
                                   $1000 for a cat is valued more highly
                                   than adopting a stray.  It is clear that
                                   dialog and politics in the US are
                                   beholden to these values, but it is not
                                   at all clear that they produce good results
                                   for the society.  -tom
                                   \_ If you have $1000 and you adopt a
                                      stray cat then you have $1000 to
                                      spend on something else. The $1000
                                      doesn't go away unless you stuff it
                                      in your mattress.
                               \_ All economies are planned, to a certain
                                  extent. The best performing economies over
                                  the long run are mixed economies, apparently
                                  ones with a bit more central planning than
                                  in the US. See Sweden vs. US long term median
                                  per capita salary growth. Even in per capita
                                  GDP they pretty much equal us, with a more
                                  evenly distributed income structure and
                                  less income volatility.
                                  \_ Sweden and the US still have roughly
                                     similar economic structures: market
                                     based democracy plus socialist programs.
                                     Sweden and the US have too many other
                                     differences... the US gets huge numbers
                                     of poor immigrants.
                                     \_ I don't really disagree, but then again
                                        the Democrats and Republicans don't
                                        really disagree either. What's 30% vs.
                                        40% state control of the economy?
                                        Mostly, a tempest in a teapot, but
                                        listening to FOX NEWS, you would think
                                        it was the difference between liberty
                                        and slavery.
                 \_ Who says what's more productive? That's USSR mentality.
                    If someone wants $800 shoes, why not? The money doesn't
                    disappear: the shoe makers profit and buy stuff from
                    others etc. and people are happier. That guy had to first
                    come up with the $800 somewhere too, probably doing
                    something productive somewhere in that chain.
                    \_ Do you have a problem with reading comprehension?
                       Noone said you shouldn't be able to buy 800 dollar
                       shoes.  But 800 dollar shoes do not help the economy
                       as much as 40 $20 shoes, assuming 40 $20 shoes are used
                       in the manner most people use them.  Just like buying
                       a 500k supercar doesn't help as much 30 people buying
                       middle of the road vehicles that let them be more
                       productive.  If you don't understand that you have
                       no bussiness saying the article writer doesn't know
                       what they are talking about.
                    \_ Can you prove that people are happier because they have
                       $800 shoes?  Because all the attempts to measure how
                       happy people are have found little or no correlation
                       between the number of luxury items someone has and
                       their level of happiness.  America has gotten
                       ridiculously wealthy in the past 60 years and has
                       not gotten any happier.  I think discussing what is
                       or isn't more "productive" is totally missing the point;
                       the purpose of our country isn't to produce as much
                       as it possibly can, the purpose is to promote the
                       general welfare of the people.  The assumption built
                       into much of our discussion is that growing the GDP is
                       equivalent to promoting the general welfare, but there
                       is really no evidence that the two are equivalent or
                       even correlated.  -tom
                       \_ Says Comrade Tom
                          \_ You have no substance.  -tom
                              \_
                                            ,. ^_^ .,  <-------- tom
                                         _ .'         '. _
                                        /\)             (/\
                                       / /               \ \
                                      ( Y)               (Y )
                       \_ The point is people buy what they want. Whether they
                          are happy or not is beside the point. It might be
                          found that slaves were happier as slaves than free
                          men.
                          \_ Actually, whether we are happy is exactly the
                             point.  Would you prefer a large and growing
                             economy where everyone is unhappy, or a static
                             economy where everyone is happy?  Getting rid
                             of weekends would do a great job of growing
                             the economy, but it would not be of societal
                             benefit.  The point is that growth of the
                             economy is not equivalent to improvement of the
                             country.  -tom
                             \_ Getting rid of weekends would be a planned
                                totalitarian move, not a market action.
                                Would it really grow the economy, I'm not
                                so sure... people need days off for errands,
                                shopping, and recreation which generates a lot
                                of GDP.
                                Of course it's better if we're happy.  Maybe
                                we should put antidepressant drugs in municipal
                                water supplies?
                                You can't make everyone happy though.  Which
                                country is so ideal in this regard?
                                This country has a highly stressed cultural
                                fabric.  We have many different races and
                                cultures which contributes to isolation and
                                lack of unity.  This is just the nature of
                                our nation and has little to do with markets.
                                Anyway, people seem pretty happy to me.
                                \_ You know that the "free market" didn't
                                   invent the weekend, right?  -tom
                  \_ Huh? That $800 already exists in the pocket of someone.
                     Whichever way they spend it is going to put $800 in
                     the pocket of the shoe company (for sake of argument
                     let's say the same company makes $800 snakeskin boots
                     and $20 rubber shoes) which will be used to pay wages and
                     investors who will then spend the money as they see fit.
                     It doesn't really matter what they buy with that $800 as
                     long as they spend it instead of saving it. In fact, since
                     luxury items have a higher markup you might argue that
                     luxury items have an environmental benefit because it's
                     less harm to the environment to make one pair of snakeskin
                     boots versus 40 pairs of rubber shoes. Same with your
                     car example. One supercar is better for the environment.
                     \_ Wealthy people spend money on vehicles that pollute
                        more. Look at Larry and Sergey. They got 2 Prii
                        but decided to get a modified 757 instead of
                        LearJet/CitationX which are more efficient. Also
                        jets carrying 2-4 people have horrible mileage
                        compared to automobiles, yet, they choose to fly
                        frequently. $$$ = more usage = more waste =
                        more pollution.
                        \_ side note: it is fucking stupid to pluralize
                           "prius" as "prii".  -tom
                           \_ Priusen
                     \_ But shoes have value.  If you take a man with no
                        shoes and give him a pair of cheap shoes he is better
                        equiped to create wealth.  Probably more wealth than
                        those shoes cost in the first place.  Luxury goods,
                        on the other hand, don't add as much beyond their
                        purchase price.  You know the whole concept that money
                        makes money?  It's not as productive if all that money
                        is being spent on is luxuries.
                     That millionaire is going to spend his $$$ on something
                     and 30 middle-of-the-road vehicle is not as efficient.
                     He's not going to give the $500K to someone else, which is
                     an assumption you seem to make. However, the $500K ends up
                     in the economy in either case where it gets spent on
                     other goods and services, perhaps on middle-of-the-road
                     vehicles purchased by the people who made the supercar.
                        \_ Sure it is, because it ends up in the same place
                           either way - in the pockets of the people who made
                           the goods. How does a millionaire buying 40
                           pairs of $20 shoes contribute more to the
                           economy than the same millionaire buying one
                           pair of $800 shoes? It doesn't.
                           \_ Generally utilitarian items are used more
                              productivly than luxuries.  Are you really this
                              stupid?  Items used friviously have less
                              benefit to an economy than items used
                              productivly.  Expensive luxuries are much more
                              likely to be used friviously.  And that's a
                              problem in economies where the wealth is
                              concentrated among a small portion.  Yes,
                              they will spend money.  Yes that money will
                              go to people who spend money.  But most of
                              the money stays in the small percentage it
                              will be spent on luxuries it won't be as
                              beneficial to the economy as a whole creating
                              less wealth than if the money was being spent
                              productivly.
                              \_ Virtually all shoes are luxuries. You can
                                 buy sturdy utilitarian shoes for $10 on
                                 sale or $20 new. People choose fashionable
                                 ones as luxuries. Luxuries make people's
                                 lives happier. This is good: we're not
                                 all working for the glory of the fatherland.
                                 Demand for luxuries creates demand for
                                 productive stuff to make those luxuries and
                                 people jobs.  We're far past the point of
                                 struggling for really basic stuff like
                                 a pair of shoes (most of us anyway). It's
                                 all about improving quality of life now.
                                 Wealth concentration is a separate issue
                                 from whether GDP growth in luxuries is
                                 somehow bad for the economy.
                                 Trade imbalances are bad, wealth
                                 concentration is bad. Economic activity good.
                                 \_ You have a hard time with reading
                                    comprehension.
                                        \_ No, this person is apparently
                                           just missing the point..
                                           Hey you!  Another, hopefully clearer,
                                           analogy:  is $10k of medicine which
                                           keeps a scientist alive, who makes
                                           a key breakthrough that makes
                                           cars 10% more efficient MORE or LESS
                                           "economically beneficial" than some
                                           rich doofus spending $10k on designer
                                           toilet paper?  Which is the better
                                           Hey you!  Another, hopefully
                                           clearer, analogy:  is $10k of
                                           medicine which keeps a scientist
                                           alive, who makes a key breakthrough
                                           that makes cars 10% more efficient
                                           MORE or LESS "economically
                                           beneficial" than some rich doofus
                                           spending $10k on designer toilet
                                           paper?  Which is the better
                                           allocation of the $10k resource?
                                           Which benefits society in general
                                           more?  Which individual is "happier"?
                                           YES, the $10k is given to someone
                                           either way, and is "recycled", but
                                           the HUMAN EFFORT required to earn
                                           the $10k is WASTED in one case and
                                           BENEFITS SOCIETY in the other.
                                           more?  Which individual is
                                           "happier"? YES, the $10k is given
                                           to someone either way, and is
                                           "recycled", but the HUMAN EFFORT
                                           required to earn the $10k is WASTED
                                           in one case and BENEFITS SOCIETY in
                                           the other.
                                           \_ This is fallacious. The $10k is
                                              not either spent on saving a
                                              scientist or someone's luxury.
                                              There are enough resources for
                                              both things to happen. You also
                                              \_ But there are not resources
                                                 enough for EVERYTHING to
                                                 happen.  The key point is
                                                 to maximize benefit of
                                                 resources expended.  $10k
                                                 designer toilet paper is
                                                 of less benefit than $10k
                                                 of beneficial preventative
                                                 immunizations, since you
                                                 apparently don't like
                                                 scientists.  Same with
                                                 $800 pair of luxury shoes
                                                 vs. 40 pair of $20 utility
                                                 shoes.  The market sometimes
                                                 does a very poor job of
                                                 maximizing benefit.
                                                 \_ The market does a better
                                                    job than any other method
                                                    can. It's not 100%
                                                    efficient, but as close to
                                                    it as one can get.
                                                    \_ Maybe, or maybe not,
                                                       but GDB does not measure
                                                       many economic goods with
                                                       value, as this article
                                                       points out.  It is broken.
                                                       points out.  It is
                                                       broken.
                                                    \_ Your theory says this.
                                                       But the reality is that
                                                       the market is better at
                                                       optimizing distribution
                                                       of some resources and
                                                       that community decision
                                                       making (democracy) is
                                                       better in other cases.
                                              don't know ahead of time whether
                                              medical spending will keep
                                              someone alive or that someone
                                              will do something good. Maybe
                                              scientist will actually go nuts
                                              and SHOOT everyone in his lab
                                              thereby HARMING SOCIETY. And at
                                              the end of the day, what do we
                                              get out of the efficient cars?
                                              Cars are luxuries too. They are
                                              mostly conveniences for people.
                                              Aren't we all supposed to move
                                              to the city and use mass transit?
                                              \_ Look, you don't know what you
                                                 talking about and you are
                                                 either trolling or stupid.
                                                 You also seem to think that
                                                 our point is that everyone
                                                 should live in a communist
                                                 society with no luxuries.
                                                 That's not what anyone is
                                                 saying.  So take off your
                                                 blinders and read the whole
                                                 thread again or just please
                                                 die.
                                                \_ Here we go with ad hominem
                                                   SPLUTTERING. Nice job,
                                                   fuckface.
                                                   Your argument is totally
                                                   disingenuous. What you're
                                                   really getting at is wealth
                                                   equalization, and hinting
                                                   at some sort of eugenics-
                                                   based resource allocation.
                                                   The guy buying ridiculous
                                                   luxuries is doing that
                                                   because he's an EVIL RICH
                                                   BASTARD.
                                                   \_ How did you ever pass
                                                      the reading comprehension
                                                      CAT tests?
                                    \_ Maybe you just don't get it.
                                       What is the point of all the "productive
                                       spending"? what is it all for? at the
                                       top of the food chain is luxury.
                                       You don't even make sense. "most of the
                                       money stays in the small percentage it
                                       will be spent on luxuries" What? speak
                                       English.
        \_ 30-40% of growth in healthcare doesn't have to mean we're getting
           more sick. It may mean we're just more and more focused on being
           healthier.
           \_ Or getting ripped off more and more by the insurance companies.
           \_ And this is the point of the article: GDP, by itself, with no
              analysis of where the money is going, is not itself an indicator
              of efficiency or success. A more meaningful figure would include
              an analysis of American health, and corruption and inefficiency
              in the healthcare industry.
              \_ That's a straw man argument. No one claimed GDP growth
                 measures efficiency, quality of life, or "success" (whatever
                 that means). However, a larger GDP almost by definition
                 means a larger economy and a larger economy means, again
                 almost by definition, more goods and services produced.
                 Think of it as "economic capacity" or "economic capability".
                 A larger GDP nation can outproduce a smaller one, whether
                 all those goods and services go to one individual
                 (dictatorship), everyone (communism), or are distributed
                 by the free market (capitalism).
                 \_ Read the article. The author argues that when the govt.
                    says that the economy is strong based solely on GDP, that
                    is a meaningless simplification. Yes, a _significantly_
                    higher GDP demonstrates the difference between a
                    modern industrialized nation and a third-world developing
                    nation. However, if the President says the economy is
                    strong because GDP has increased half a percent, what does
                    that mean? Does it mean people paid more money for the
                    same amount of gas (money that goes directly into the
                    pockets of the House of Saud)? Does it mean more people
                    are eating out? Does it mean that it was hotter this
                    summer so ice cream sales are on the rise? It might mean
                    any of the above or none at all. At small levels of
                    difference, it's a meaningless stat.
                    \_ But it's a straw man argument, because no one is
                       saying that GDP by itself is so incredibly meaningful.
                       This is mentioned in Econ 1, as are externalities.
                       Real GDP versus nominal GDP are also basic concepts.
                       So this genius author points out something every Econ 1
                       student learns - that there are limitations and
                       caveats when measuring economic output and that GDP
                       (even Real GDP) alone doesn't tell the whole story. BFD.
                       Even the Wikipedia article on GDP talks about its
                       limitations. There was nothing interesting or novel
                       in that article.
                       \_ Sweet mother of god, this guy is not talking about
                          people who've taken Econ 101, he's talking about
                          politicians who wave around a 1-point increase in
                          GDP as if it's the holy fucking grail.
                          \_ So you're damning a statistic and centuries of
                             economics on measuring econ output because Bush
                             and other policticians are abusing the term?
                             and other politicians are abusing the term?
                             \_ Did you read the article?
                                \_ I don't know if he did, but I did and
                                   it was full of crap like (coming full
                                   circle) the specious argument about $800
                                   shoes somehow contributing less than
                                   40 pairs of $20 shoes. He worries that
                                   "[t]he money in the big pot could be going
                                   to cancer treatments or casinos, violent
                                   video games or usurious credit-card rates."
                                   Yes, it could. So what? It's still economic
                                   output. Somehow "violent video games" are a
                                   lesser form of economic output or something?
                                   It sounds like he wants to characterize
                                   what is "good spending" and what is
                                   not. In fact, he goes so far as to say
                                   that people are not rational with their
                                   expenditures. Presumably they would be
                                   a lot happier if he made their expenditures
                                   for them? He speculates that marriage is a
                                   threat to GDP because there's no divorce
                                   spending? Is he on crack? The money that
                                   isn't spent on divorce will be spent on
                                   something else (or invested). It doesn't
                                   disappear and will be reflected in the
                                   GDP either way as the person who receives it
                                   will then make his own economic decisions.
                                   Economics is not about value judgements.
                                   His article boils down to: "People
                                   don't spend their money the way I think
                                   they should." No wonder Tom likes it.
                                   \_ His point was that touting an increase in
                                      the GDP as some sort of indicator of
                                      the health of the nation is overly
                                      simplistic and meaningless. We're
                                      measuring throughput while ignoring
                                      destination. We don't know if the end
                                      result is investment in our own
                                      economy (yay!) or pools full of diamonds
                                      in Riyadh (boo). He's saying that we
                                      \_ GDP includes an exports minus imports
                                         in the equation. Consumption isn't a
                                         one way street. To pay for diamonds in
                                         Riyadh requires spending money.
                                      need to assess more than just the amount
                                      of money that trades hands. That's not
                                      the same as a "planned economy" a la
                                      Stalin or Mao; it's arming the consumer
                                      with tools for making more informed
                                      choices. His point about divorce was an
                                      obvious exaggeration designed to show
                                      that an activity which increases money
                                      flowing from one set of hands to another
                                      is not necessarily an indicator of a
                                      a healthy economy; it's an indicator of
                                      nothing more than money moving. I don't
                                      see where you see this ominous shadow
                                      of socialism that seems to have you in
                                      a tizzy. I don't see anything anti-
                                      capitalism in wanting to know where the
                                      money's flowing; if anything, I think
                                      it's the basis for the purest capitalism.
                                      \_ Nothing wrong with knowing where
                                         the money is flowing, but what does it
                                         matter? His undertone is that it's not
                                         necessarily flowing where it should
                                         be. He can't make that call. Divorces
                                         make plenty of people happy. Recall
                                         the days before they were common.
                                         I can sell you a service and then you
                                         can sell me one back. It's not
                                         "nothing more than money moving". Two
                                         services were performed.
                                         \_ Do you think that having two
                                            parents working and paying a
                                            nanny to raise the kids is
                                            inherently better for the
                                            country than having one parent
                                            stay home?  -tom
                                            \_ No idea and, unlike you, I don't
                                               profess to know.  However, if
                                               parents are doing it then they
                                               must feel it benefits them and
                                               their family.
                                               \_ The problem is, because we
                                                  are measuring our success
                                                  by GDP, we create political,
                                                  economic, and social
                                                  incentives to make the
                                                  choice to outsource
                                                  parenting.  Prior to Keynes,
                                                  families with two working
                                                  parents were virtually
                                                  unheard of; now they are the
                                                  common case.  It's
                                                  fallacious to consider this
                                                  the result of the free
                                                  market, except insofar as
                                                  free market ideology values
                                                  monetary transactions and
                                                  thus encourages them.  You
                                                  get what you measure.  -tom
                                                 \_ Uh, that's not due to
                                                    measuring GDP. Those
                                                    incentives exist anyway.
                                                    Prior to Keynes women
                                                    couldn't even vote in
                                                    general and their
                                                    economic opportunities
                                                    were culturally limited.
                                                    How do you propose to
                                                    "get the women back in
                                                    the kitchen"?
                                                    \_ Look, it's simple;
                                                       the metric you use to
                                                       measure success has
                                                       effects on behavior.
                                                       This is self-evident.
                                                       The primary measure we
                                                       have used to measure
                                                       success of the country
                                                       in the past 60 years
                                                       has been GDP.  It is
                                                       not at all coincidental
                                                       that the society we
                                                       have built in that time
                                                       values consumption,
                                                       planned osbolescence,
                                                       and outsourcing.  Those
                                                       are predictable effects
                                                       of using GDP to measure
                                                       success.  The point is,
                                                       no one ever bothered to
                                                       prove that we'd be
                                                       better off with GDP
                                                       as our primary success
                                                       metric.  And it's not
                                                       clear that we are.  -tom
                                                       \_ Dude, you are way out
                                                          on a wobbly limb here.
                                                          The BEA uses GDP as
                                                          a measurement of
                                                          economic strength.
                                                          You'll have a hard
                                                          time proving that
                                                          individual purchasing
                                                          and business
                                                          decisions are
                                                          somehow tied to that
                                                          measuring stick.
                                                          Consumers and
                                                          corporations aren't
                                                          making decisions
                                                          based on how they
                                                          affect GDP. GDP
                                                          reflects the
                                                          decisions. It doesn't
                                                          drive them.
                                                          \_ The incentives
                                                             our society puts
                                                             in place are based
                                                             on how they affect
                                                             GDP.  Individual
                                                             decisions are
                                                             skewed based on
                                                             those incentives.
                                                               -tom
                                                             \_ I assume you are
                                                                referring to
                                                                interest rates
                                                                when you say
                                                                incentives?
                                                                I think your
                                                                position is
                                                                untenable.
                                                                Rates are
                                                                determined
                                                                by a lot more
                                                                than just GDP
                                                                and it's not
                                                                clear to what
                                                                extent monetary
                                                                policy affects
                                                                the economy.
                                                                (See Japan's 0%
                                                                rates and yet
                                                                sluggish
                                                                economy.)
                                                                You are
                                                                reaching.
                                                                _/
                                        Why would you assume I'm
                                        referring to interest rates?
                                        I'm referring to an enormous
                                        number of decisions around
                                        taxation, subsidy, and policy.
                                        For example, farm subsidies
                                        for factory farms.  "Get big
                                        or get out."  Subsidy for the
                                        road system, while passenger
                                        rail is starved.  Oil
                                        subsidies.  The military-
                                        industrial complex.  Allowing
                                        obnoxious advertising
                                        virtually everywhere.  Christ,
                                        the week after 9/11 there were
                                        press conferences that weren't
                                        about terrorism or security,
                                        they were about "America: Open
                                        For Business!"  All these
                                        things are in support of the
                                        idea that more consumption is
                                        better.  You can't go through
                                        an election cycle without
                                        hearing virtually every
                                        politician talk about "growing
                                        the economy" and "creating
                                        jobs"; no one even suggests
                                        that growing the economy might
                                        not be the right goal.  -tom
                                       \_ Please provide proof that any of
                                          these are tied to a large extent to
                                          the way that GDP is measured. I
                                           mean, seriously, how does the
                                           way GDP is measured lead to the
                                           decision (if it's even true,
                                           which is its own argument) to
                                           subsidize roads versus rail?
                                           How would you change the way
                                           GDP is measured in order to get
                                           the "correct" result?
                                          mean, seriously, how does the way
                                          GDP is measured lead to the decision
                                          (if it's even true, which is its own
                                          discussion) to subsidize roads
                                          versus rail? How would you change
                                          the way GDP is measured in order to
                                          get  the "correct" result?
                                          \_ hi dim!
                                          \_ I'm not talking about changing the
                                             way GDP is measured, I'm talking
                                             about changing the way *success*
                                             is measured.  Success is measured
                                             in the US by GDP growth, therefore
                                             politicians make decisions which
                                             encourage GDP growth.  An
                                             auto-based culture has many more
                                             transactions than a transit-based
                                             culture; its inefficiency
                                             "creates jobs" and therefore is
                                             good if you're measuring success
                                             by GDP.   -tom
                                             good if y
                                             good if you measure success by
                                             GDP.  -tom
                                             \_ What you are missing, just like
                                                before, is that *if* a
                                                mass-transit-based culture has
                                                fewer transactions and/or
                                                smaller transactions (not
                                                necessarily true) then that
                                                leaves more resources to
                                                spend on other projects,
                                                which makes the GDP pretty
                                                much unchanged as compared
                                                to auto-based. These are not
                                                decisions that affect the size
                                                of GDP. These are distribution
                                                decisions: how do we spend the
                                                GDP that we are capable of
                                                generating.
                                                \_ What *you* are missing is
                                                   that GDP is the result of
                                                   labor, and that the US
                                                   systematically encourages
                                                   choices which result in
                                                   increased labor.  For
                                                   example, if someone stays
                                                   home with the kids, that
                                                   family will have less
                                                   income and spend less money.
                                                   If someone decides to take
                                                   a lower-paying job so he
                                                   doesn't have to commute
                                                   an hour each way, the family
                                                   will have less income.
                                                   If someone decides to work
                                                   a part-time job because he
                                                   really enjoys working in
                                                   the garden, and is able
                                                   to provide a good percentage
                                                   of the food the family
                                                   consumes, the family will
                                                   have less income.  In all
                                                   these scenarios, the family
                                                   spends less and thus
                                                   contributes less to GDP.
                                                   It's not a zero-sum game.
                                                   Why should Americans work
                                                   more hours and have less
                                                   vacation than Europeans?
                                                   Shouldn't our excees
                                                   capacity be used at least
                                                   partly to give people more
                                                   leisure time?  -tom
                                                   \_ That's not some official
                                                      policy. That's just
                                                      economics. Yes, choosing
                                                      to work less results in
                                                      less output. If you work
                                                      a good job you can afford
                                                      to have lots of free time
                                                      if you want. Maybe our
                                                      capacity isn't as excess
                                                      as it seems... tons of
                                                      people are in debt. Maybe
                                                      it's a function of our
                                                      banking industry which
                                                      idolizes debt. Debt
                                                      pushes up money supply
                                                      and inflates everything.
                                                      We have to go into debt
                                                      to compete for resources
                                                      against everyone else who
                                                      is in debt, working off
                                                      their monthly payments.
                                                      We're all indentured to
                                                      banks.
                                                      people are in debt.
                                                      Americans don't like to
                                                      "do without".
                                                      \_ Our use of GDP as a
                                                         measure for success
                                                         is not merely an
                                                         official policy; it
                                                         is deeply ingrained
                                                         in our culture.  The
                                                         idea that more is
                                                         always better has been
                                                         so effectively sold to
                                                         us that most Americans
                                                         accept the idea as
                                                         axiomatic.  It's not.
                                                         There is no reason
                                                         why Americans need
                                                         to use 2-3 times more
                                                         resources per capita
                                                         than Europeans; we
                                                         just assume that the
                                                         ways we do things are
                                                         the best ways, because
                                                         that's the way we've
                                                         "always" done it. -tom
                                                        \_ It's not just us.
                                                           Immigrants who come
                                                           here lap it up. And
                                                           they all use GDP to
                                                           measure their econs.
                                                           \_ GDP is a decent
                                                              measurement of
                                                              the size of an
                                                              economy.  It's
                                                              not clear it's
                                                              a good
                                                              measurement of
                                                              the *success*
                                                              of an economy.
                                                               -tom
                                \_ You are just wrong about there being
                                   centuries of measuring economic statistics.
                                   This stuff was practically invented by FDR
                                   and his economists. Keynes is considered
                                   the father of Macroeconomics.
2021/12/08 [General] UID:1000 Activity:popular
12/8    

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harpers.org/archive/2008/06/0082042
Jonathan Rowe From testimony delivered March 12 before the Senate Committee on Commerce, Science, and Transportation, Subcommittee on Interstate Commerce. Rowe is codirector of West Marin Commons, a community-organizing group, in California. Suppose that the head of a federal agency came before this committee and reported with pride that agency employees had burned 10 percent more calories at work last year than they did the year before. What were these employees doing when they burned those calories? Expenditure is a means, not an end, and to assess the health of an agency, or system, you need to know what it has accomplished, not just how much motion it has generated and money it has spent. The point seems obvious, yet Congress ignores it every day when it talks about "the economy." Every time you say that "the economy" is up, or that you want to "stimulate" it, you are urging more expenditure and motion without regard to what that expenditure is and what it might accomplish, and without regard to what it might crowd out or displace in the process. That term "the economy": what it means, in practice, is the Gross Domestic Product-a big statistical pot that includes all the money spent in a given period of time. If the pot is bigger than it was the previous quarter, or year, then you cheer. If it isn't bigger, or bigger enough, then you call Federal Reserve Chairman Ben Bernanke up here and ask him to do some explaining. The what of the economy makes no difference in these councils. The money in the big pot could be going to cancer treatments or casinos, violent video games or usurious credit-card rates. It could go toward the $9 billion or so that Americans spend on gas they burn while they sit in traffic, or the billion plus that goes to such drugs as Ritalin and Prozac that schools are stuffing into kids to keep them quiet in class. The money could be the $20 billion or so that Americans spend on divorce lawyers each year, or the $41 billion on pets, or the $5 billion on identity theft, or the billions more spent to repair property damage caused by environmental pollution. The money in the pot could betoken social and environmental breakdown-misery and distress of all kinds. All you want to know is the total amount, which is the GDP. I am talking about what you mean when you use that term "the economy." Few words induce such a reverential hush in these halls. When you argue that a proposal will help the economy or hurt it, then you have played the ultimate trump card in your polemical deck, bin Laden possibly excepted. To be reflexively against growth is as numb-minded as to be reflexively for it. It is an insanity that is embedded in the political debate and in media reportage, and it leads to fallacy in many directions. We hear, for example, that efforts to address climate change will hurt "the economy." Does that mean that if we clean up the air we will spend less money treating asthma in young kids? The atmosphere is part of the economy, too-the real economy, that is, though not the artificial construct portrayed in the GDP. It does real work, as we would discover quickly if it were to collapse. If we burn more gas, the expenditure gets added to the GDP. But there is no corresponding subtraction for the toll this burning takes on the thermostatic and buffering functions that the atmosphere provides. By the standard of the GDP, the worst families in America are those that actually function as families-that cook their own meals, take walks after dinner, and talk together instead of just farming the kids out to the commercial culture. Cooking at home, talking with kids, walking instead of driving, involve less expenditure of money than do their commercial counterparts. Solid marriages involve less expenditure for counseling and divorce. Thus they are threats to the economy as portrayed in the GDP. By that standard, the best kids are the ones who eat the most junk food and exercise the least, because they will run up the biggest medical bills for obesity and diabetes. This assumption has been guiding our economic policies for the past sixty years at least. Is it surprising that the family structure is shaky, real community is in decline, and children have become petri dishes of market-related dysfunction and disease? The nation conceives of such things as growth and therefore good. It is not accidental that the two major protest movements of recent decades-environmentalist and pro-family-both deal with parts of the real economy that the GDP leaves out and that the commercial culture that embodies the GDP tends to erode. How did we get to this strange pass, where up is down and down is up? How did it happen that the nation's economic hero is a terminal-cancer patient going through a costly divorce? How is it that Congress talks about stimulating "the economy" when much that will actually be stimulated is the destruction of things it says it cares about on other days? How did the notion of economy become so totally uneconomic? British troops had just repressed another uprising there, and the Cromwell government had devised a final solution to put its Irish problem to rest. The government would remove a significant portion of the populace-Catholics in particular-to remote parts of the island. Then it would redistribute their lands to British troops, thus providing compensation to them and establishing an occupational presence for the benefit of the government in London. The task of creating an inventory of the lands went to an army physician by the name of William Petty, a quick study and a man with an eye for the main chance. He classified much land as marginal that actually was quite good. Then he got himself appointed to the panel that made the distributions and bestowed much of that land upon himself. Petty's survey was the first known attempt in Western history to create a total inventory of a nation's wealth. It was not done for the well-being of the Irish people but rather to take their land away from them. It was an instrument of government policy, and this has been true from that time to the present. Governments have sought to catalogue the national wealth for purposes of taxation, confiscation, planning, and mobilization in times of war. 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preview.tinyurl.com/bgprg -> www.worldpublicopinion.org/pipa/articles/btglobalizationtradera/154.php?nid=&id=&pnt=154&lb=btgl
Questionnaire/Methodology A new poll of 20 countries from around the world finds a striking global consensus that the free market economic system is best, but that governments should also do more to regulate large companies. In all but one country polled, a majority or plurality agreed with the statement that the free enterprise system and free market economy is the best system on which to base the future of the world. Program on International Policy Attitudes (PIPA) of the University of Maryland. Ironically, the country that showed the highest level of support for the free enterprise system was China, with 74% agreeing that it is the best system. Others that were nearly as enthusiastic were the Philippines (73%), the US (71%), and India (70%). France was the one country where most did not agree with this proposition. Only 36% of the French agreed that the free market economy is the best system, while 50% disagreed. Others that only showed plurality support for the proposition were Argentina (42% agree), Russia (43%), and Turkey (47%). At the same time, there is even greater consensus in favor of more government regulation of large companies. Solid majorities in every country favored more regulation of large companies to protect the rights of workers (mean 74%), the rights of consumers (mean 73%), and the environment (mean 75%). Support for more regulation reached at least two-thirds in every country except Russia and Germany, where support was consistently in the mid 50s, and South Korea, where 54% supported greater regulation to protect workers. In Russia, however, 17-18% favored more enforcement of existing regulations to protect workers, consumers and the environment. A majority in 15 of the 20 countries also favored greater government regulation to protect the rights of investors (mean 54%). Broadly, most agreed that The free enterprise system and free market economy work best in society's interests when accompanied by strong government regulations. This view was endorsed by two out of three overall (65%). In 18 countries this was endorsed by a clear majority, with Indonesia (86%), the Philippines (77%), and China (76%) being the most definitive. It was endorsed by a plurality in Poland (47%) and attitudes were divided in South Korea (46% agreed, 43% disagreed). In not a single country did a plurality or majority disagree. gif Steven Kull, director of PIPA, comments: In one sense we are indeed facing what has been called the end of history, in that there is now an extraordinary level of consensus about the best economic system. But this is not the victory of one side of the dialectic. While there is overwhelming support for free markets, there is also near-unanimous rejection of unbridled capitalism, with people around the world overwhelmingly favoring greater government regulation of large companies and more protection of workers and consumers. While there is consensus in support of the vitality of free markets, there are also somewhat ominous signs of concern that the system may not be working as it should. In nearly every country, large majorities agree that Large companies have too much influence over our national government. In several countries people were especially emphatic, with large percentages saying that they strongly agreed with this statementMexico (88% agree, 74% strongly), the United States (85% agree, 59% strongly), and Spain (84% agree, 58% strongly). Only three countries did not overwhelmingly endorse this statement. Nigeria was the one country where a slight majority (51% to 41%) disagreed. China was divided (47% agreed, 44% disagreed) and a more modest majority agreed in Turkey (59%). The survey asked respondents how much they trust a number of institutions to operate in the best interests of our society. gif Global companies operating in their country received the lowest ratings. On average 41% expressed trust, with only 7% saying they had a lot of trust and another 34% saying they had some trust. Just over half said they had not much trust (33%) or no trust at all (19%). Mid-level countries expressed the highest levels of mistrustRussia (70%), Argentina (68%), Brazil (64%), Turkey (61%). Developed countries were also quite mistrustful, especially in EuropeItaly (66%), Germany (62%), France (61%), and Spain (60%). People in other developed countries are also mistrustful but in smaller numbersSouth Korea (55%), US (52%), Canada (50%). People in many developing countries did express trust, especially Nigeria (67%), Kenya (65%), and China (60%). Overall, people in 13 countries were more likely to say that they were mistrustful, five were more likely to express trust and two were divided (Mexico and the Philippines). gif Large national companies received ratings more evenly mixed. On average 49% said that felt a lot of trust (8%) or some trust (41%), while 47% said that they felt not much (32%), or no trust (15%). Here again there was substantial variation between countries. Again, developing countries were the most apt to express trustIndonesia (69%), India (64%), China (63%), Kenya (61%). Mid-level countries were mostly mistrustfulBrazil (63%), Russia (57%), Poland (55%), Argentina (54%)but there were exceptions, with majorities expressing trust in Mexico (58%) and Turkey (54%). In developed countries, trust in national companies was fairly low (though not as low as for global companies), with majorities expressing mistrust in Germany (64%), South Korea (58%), and Spain (56%). But here too there were exceptions, with a majority expressing trust in Canada (59%) and views divided in Britain, the US and Italy. GlobeScan President Doug Miller comments, Its a good news/bad news story. While the string of corporate scandals worldwide has undermined trust in large companies, it has not broken the publics faith in the free enterprise system overall. However, our research reveals formidable public pressure for more regulation of the system. To keep ahead of this regulatory curve, companies will need to increasingly demonstrate that they are operating in societys best interest rather than just their own. The social contract needs to be re-built around the free market. These findings are drawn from the 2005 GlobeScan Report on Issues and Reputation, based on a global public opinion poll with citizens across 20 countries (n=1,000 in most countries), conducted between June and August 2005 by research institutes in each participating country, under the leadership of GlobeScan. Variations by Education and Income In aggregate, agreement that the free market system is best was higher among those with high education (64%) than low education (56%), as well as those with very high income (66%) as compared to those with very low income (59%), but the differences were slight. The view that large companies have too much influence over national governments follows the same pattern. Those with high education were more likely to agree (79%) than those with low education (69%). Contrary to the stereotype that very-high-income people perceive the influence of large companies as serving their interests, those with very high incomes were more likely to agree that such companies have too much influence (77%) than those with very low income (66%). Majority support for greater regulation to protect the rights of workers was a bit higher among those with low education (78%) than with high education (68%), and by those with very low income (80%) over those with very high income (71%), but the differences were strikingly slight. The same pattern obtained for greater regulation to protect the rights of consumers, but the variation was even smaller. Interestingly, the same pattern obtained for greater protection of the rights of investors, with 56% of those with low education favoring more regulation as compared to 50% among those with high education, and 59% of those with very low income as compared to 50% among those with very high income. Though those with higher education and income are more likely to be investors, those with low education and income are more likely to think that investors need government protection. No significant variation...